Dutch Gaming Authority: Loot boxes fall under the scope of the Act on games of chance

The Gaming Authority published a study on 19 April 2018 regarding the use of loot boxes in a number of popular computer games.

A loot box is a virtual treasure chest. The research of the Gaming Authority focused, among other things, on games in which players can purchase loot boxes with real money and – upon opening of the box – are rewarded with random items that the player can or cannot trade with other persons.

In accordance with Article 1 of the Dutch Betting and Gaming Act (WOK), offering a game of chance without a license is not allowed. A game of chance exists if a prize can be won, and participants are unable to influence who the winner is. Under WOK, providing and organising games of chance are only allowed with a government permit.

The Gaming Authority found in its investigation that loot boxes fall under the definition of Article 1 of WOK, and that certain loot boxes are currently prohibited in the Netherlands. No permit can be obtained for loot boxes at this time.

In addition, the Gaming Authority concluded that there is a possible link between loot boxes and gambling addiction. The Gaming Authority therefore advises providers of games of chance to remove addiction-sensitive elements ('near-profit' effects, visual effects, the ability to open loot boxes in quick succession, etc.) from the games, and to take measures to exclude groups vulnerable to addiction.

Definition of a game of chance

First and foremost, a game of chance must contain an 'element of chance'. Article 1 of WOK stipulates that a winner's designation must take place by means of a chance determination, which participants cannot influence (eg by throwing dice or opening a treasure chest.) The Court of The Hague has ruled that a game of skill exists only when a majority of the participants have a dominant influence on creating the winner or winners.

It is therefore difficult to establish a concrete boundary where a game of skill changes into a game of chance, and vice versa. According to the Gaming Authority, loot boxes comply with the probability element when a player cannot influence what is gained by opening the boxes.

In addition, games of chance must include a 'price'. Although the Gaming Authority does not comprehensively define this term, the most fitting definition is provided in Article 3, paragraphs 2 and 3 of the Betting and Gaming Tax Act. In short, according to these provisions the goods obtained by participants when playing the game will have a certain economic value. In short, the object or property obtained from a loot box falls under the definition of price if it is transferable, and represents an economic value.

Conclusions of the Gaming Authority

The Gaming Authority concluded that a number of worldwide popular games contain a feature (in this case, a loot box), which is in conflict with WOK since loot boxes qualify as a "game of chance".

Loot boxes qualify in this way if their content is determined by chance, and the object or property obtained by the loot box can be transferred either inside or outside the game (ie through a third party platform). For games with loot boxes fitting this definition, government permits are required for distribution and use in the Netherlands.

At present, the Dutch gaming market is still closed, and it is not possible to obtain a government permit. Adoption of a legislative proposal for Remote Gambling is expected in due course, which will make the market accessible to third parties (and possibly third parties offering loot boxes). Until then, offering transferable loot boxes in the Netherlands is strictly prohibited.

Although the Gaming Authority does not mention any names of games that make use of a prohibited loot box, the Netherlands Broadcasting Corporation (NOS) reported that the Gaming Authority refers to the following four games: FIFA, Dota 2, PlayerUnknown's BattleGrounds, and Rocket League.

The Gaming Authority has now requested that providers of a number of games with loot boxes remove this feature from their games, or modify them. Enforcement actions will take place beginning 20 June 2018 in case of non-compliance.

For game providers, the stakes are high because of the high turnover from loot boxes and similar elements. The question is whether the Gaming Authority will actually intervene and take action against non-complying game providers.

Time will tell. For now, the Gaming Authority has given a clear warning.